Chip Makers Will Merge in Deal Worth $11.8B(nytimes.com)
nytimes.com
Chip Makers Will Merge in Deal Worth $11.8B
http://www.nytimes.com/2015/03/02/business/chip-makers-will-merge-in-deal-worth-11-8-billion.html
8 comments
"Investment bankers, being paid as they are for action, constantly urge acquirers to pay 20% to 50% premiums over market price for publicly-held businesses. The bankers tell the buyer that the premium is justified for “control value” and for the wonderful things that are going to happen once the acquirer’s CEO takes charge. (What acquisition-hungry manager will challenge that assertion?)
A few years later, bankers – bearing straight faces – again appear and just as earnestly urge spinning off the earlier acquisition in order to “unlock shareholder value.” Spin-offs, of course, strip the owning company of its purported “control value” without any compensating payment. The bankers explain that the spun-off company will flourish because its management will be more entrepreneurial, having been freed from the smothering bureaucracy of the parent company. (So much for that talented CEO we met earlier.)
If the divesting company later wishes to reacquire the spun-off operation, it presumably would again be urged by its bankers to pay a hefty “control” premium for the privilege. (Mental “flexibility” of this sort by the banking fraternity has prompted the saying that fees too often lead to transactions rather than transactions leading to fees.)"
A few years later, bankers – bearing straight faces – again appear and just as earnestly urge spinning off the earlier acquisition in order to “unlock shareholder value.” Spin-offs, of course, strip the owning company of its purported “control value” without any compensating payment. The bankers explain that the spun-off company will flourish because its management will be more entrepreneurial, having been freed from the smothering bureaucracy of the parent company. (So much for that talented CEO we met earlier.)
If the divesting company later wishes to reacquire the spun-off operation, it presumably would again be urged by its bankers to pay a hefty “control” premium for the privilege. (Mental “flexibility” of this sort by the banking fraternity has prompted the saying that fees too often lead to transactions rather than transactions leading to fees.)"
And a counterpoint:
http://epicureandealmaker.blogspot.com/2015/03/uncle-warren-...
Accept no one's argument at face value, especially when it's coming from a man who has spent the last 50 years exploiting market inefficiencies.
http://epicureandealmaker.blogspot.com/2015/03/uncle-warren-...
Accept no one's argument at face value, especially when it's coming from a man who has spent the last 50 years exploiting market inefficiencies.
"Apparently some doddering old fart in Omaha, Nebraska published a celebratory letter yesterday."
"I tend to prefer my moral fiber to come unencumbered by six cups of refined sugar and smug self satisfaction per serving. I know, I know: I am downright un-American."
And finally, in the fourth paragraph, the author finally starts the story with "Aaannnyhoo".
This guy is a pretty insufferable writer.
"I tend to prefer my moral fiber to come unencumbered by six cups of refined sugar and smug self satisfaction per serving. I know, I know: I am downright un-American."
And finally, in the fourth paragraph, the author finally starts the story with "Aaannnyhoo".
This guy is a pretty insufferable writer.
Yup, but that doesn't change the fact that he's right though. Read through his posts -- it is readily apparent that he knows what he is talking about.
The author doesn't provide much of a counterpoint: underneath the layers of rudeness and rhetorical flourishes, the only point of the article is that Mr. Buffet generally purchases companies for less than what the seller would receive in an auction managed by investment bankers.
This rebuts none of Mr. Buffet's points (not even those brought up in the parts of the letter that the author quotes), nor is it very insightful. Mr. Buffet has always ascribed to and publicly stated that he looks for deals, buying companies when they are cheap.
This rebuts none of Mr. Buffet's points (not even those brought up in the parts of the letter that the author quotes), nor is it very insightful. Mr. Buffet has always ascribed to and publicly stated that he looks for deals, buying companies when they are cheap.
If you're working at a startup, I hope there aren't people relying on you to negotiate an exit down the road.
Thanks for that link. It also links to http://www.bloombergview.com/articles/2015-02-28/warren-buff..., which is well worth the read.
You could do a lot worse than just follow Epicurean Dealmaker and Matt Levine for your daily/weekly/whatever fix of financial news.
I hope Freescale's openness with their datasheets and sample policy survive the merger. It seems NXP is the one consuming Freescale, however.
NXP is the most paranoid and ridiculous company I've ever had the displeasure of dealing with. Even after signing two separate NDAs with different parts of NXP, they still wouldn't give us complete sets of datasheets for parts we were considering. I don't know how they can sell anything at all; it's impossible to use their parts in a design.
I've found NXP a lot better than Broadcom. They're like getting blood from a stone unless you're doing massive volumes... At least a lot of NXP's are freely available (like for all their micros)
Genuine question: why do they do this? Is it to protect their customers from reverse engineers?
I'd love to know, too! FBI agents were flipped for $100,000, just cause they needed the cash. Escaped detection for decades. CIA agents were turned, too.
While I'd not be surprised to see corporate security better than the FBI's stuff[1], I find it hard to believe you can't just get agents on the inside for the amount of money involved. So secrecy seems so unlikely to be useful against the companies that can really benefit from that knowledge.
It reminds me of Nikon not documenting their white balance settings in their RAW format. Just stupidity all around.
1: A long time ago, I saw Microsoft Internal Affairs in action. They were fast and setup a sting, complete with their own undercover agents/turned insiders, in a matter of weeks from first tip-off. I'd imagine companies like pharma or chips, would have even more severe response. Whereas in the FBI, one multi-decade mole was actually caught once or twice, but talked his way out. At one point, he even led the investigation against himself.
While I'd not be surprised to see corporate security better than the FBI's stuff[1], I find it hard to believe you can't just get agents on the inside for the amount of money involved. So secrecy seems so unlikely to be useful against the companies that can really benefit from that knowledge.
It reminds me of Nikon not documenting their white balance settings in their RAW format. Just stupidity all around.
1: A long time ago, I saw Microsoft Internal Affairs in action. They were fast and setup a sting, complete with their own undercover agents/turned insiders, in a matter of weeks from first tip-off. I'd imagine companies like pharma or chips, would have even more severe response. Whereas in the FBI, one multi-decade mole was actually caught once or twice, but talked his way out. At one point, he even led the investigation against himself.
The Police Chief didn't know he was double crossed by Internal Affairs all along! I would fucking love to see one of those type of Dirty Harry films done in a megacorporate setting.
Here's another, Microsoft Internal Affairs more recently in action:
http://www.nytimes.com/2014/03/21/technology/microsofts-soft...
Here's another, Microsoft Internal Affairs more recently in action:
http://www.nytimes.com/2014/03/21/technology/microsofts-soft...
I've worked with all these guys, and the most plausible reason I observed boiled down to anti-counterfeiting: in their view, data sheets are a map to creating register- and pin-compatible clone parts.
While the knockoff market is very real, it always seemed far-fetched that NDAing data sheets would be that much of a protection. You would think a sophisticated shop has enough relationships to get the sheets via a close contact, friendly supplier, etc..
While the knockoff market is very real, it always seemed far-fetched that NDAing data sheets would be that much of a protection. You would think a sophisticated shop has enough relationships to get the sheets via a close contact, friendly supplier, etc..
It's unfortunate that such backwards thinking persists. At some point you'd think they'd realize that datasheets are also a map to creating register- and pin-compatible designs.
A couple of reasons like inadvertent patent violation, to prevent clones, more closer to customer. The problem with this method is it requires lots of sales and support staff and they all want to focus on the big customers with huge run rates. So if you are a someone with a big pocketbook they will wait on you hand and foot. Anyone else is just not worth the time.
Can you tell us what's the nature of this part?
IMHO NXPs datasheets were usually ok (for common parts, of course)
IMHO NXPs datasheets were usually ok (for common parts, of course)
I had a similar experience getting usable documentation for NXP's RF tuner ICs. In the end, I had to do a ton of guesswork on top of the partial documentation they were willing to share to end up with a working design.
Which is funny because at one point I stumbled upon a web site that was selling layer-by-layer microphotographs of the chip I was using. They weren't much use to me, but for someone wanting to reverse engineer the chip I'm sure they would be a lot more useful than a complete description of the chip's external interface.
Which is funny because at one point I stumbled upon a web site that was selling layer-by-layer microphotographs of the chip I was using. They weren't much use to me, but for someone wanting to reverse engineer the chip I'm sure they would be a lot more useful than a complete description of the chip's external interface.
Mifare Desfire EV1 RFID tag[1].
[1]: http://uk.farnell.com/nxp/mf3mod4101da4-05-1/rfid-read-write...
[1]: http://uk.farnell.com/nxp/mf3mod4101da4-05-1/rfid-read-write...
Well, that's why. The security on those is a joke.
Yay security by obscurity.
Yay security by obscurity.
Ah I can understand why so many NDAs (especially after the security breaches they have had)
Were you in a position to use a competitor's parts?
Having worked at NXP for a short time, I agree with you but I have the impression that most of the unwillingness to be open (with those things it makes perfect sense to be open about) comes from laziness and fear of unintended consequences.
The center of gravity of power is held by groups with security focuses and they're supposed to be professional paranoids... It's just unfortunate that the least effort, safest decision for many other folks is one which can be seen as consistent with what those groups would have made.
The center of gravity of power is held by groups with security focuses and they're supposed to be professional paranoids... It's just unfortunate that the least effort, safest decision for many other folks is one which can be seen as consistent with what those groups would have made.
tldr; NXP Semiconductors is buying Freescale Semiconductor.
And for historical context, Freescale Semiconductor is the spinoff of the original Motorola's Semiconductor Products Division, that was a transistor and semiconductor pioneer as well as building the 680x0 and several of the PowerPC processors for the Apple Macintosh back in the day.
Bit sad to see another company with prestigious history to get swallowed like this. Another similar story not too long ago was when Infineon acquired IRF http://www.irf.com/press-room/press-releases/nr140820i
Are there new players enough to fight the ever-growing conglomerates?
Are there new players enough to fight the ever-growing conglomerates?
Rip Burr-Brown, National Semiconductor, Zetex.
Pf... that's half a whatsapp.
Again smaller player acquires larger ones,USA lost another used to be good company
Why would Freescale become a "used to be good" company as a part of NXP? NXP is a pretty cool company IMO. They make lots of cool tech and they got out of the "split off from Philips and take all our debt with you" turd of a deal remarkably well.
(For the interested, NXP used to be Philips Semiconductors. Philips wanted to cut them away because it was an unprofitable division so they sold it to some hedge funds, including a shit ton of debt. Afair, something like 20% of their annual expenses were interest only, putting a big damper on their freedom to innovate. So NXP in turn cut away its unprofitable subdivisions, and became or stayed remarkably competitive in the others. With an inheritance of relatively expensive R&D (no Chinese wages) and a Philips culture (= highly bureaucratic and hierachical), that is no small feat)
To me, an uneducated observer, the fact that NXP now feels in shape to do big acquisitions is a pretty good signal. These guys are on the rise, and that may not be bad for Freescale at all.
(For the interested, NXP used to be Philips Semiconductors. Philips wanted to cut them away because it was an unprofitable division so they sold it to some hedge funds, including a shit ton of debt. Afair, something like 20% of their annual expenses were interest only, putting a big damper on their freedom to innovate. So NXP in turn cut away its unprofitable subdivisions, and became or stayed remarkably competitive in the others. With an inheritance of relatively expensive R&D (no Chinese wages) and a Philips culture (= highly bureaucratic and hierachical), that is no small feat)
To me, an uneducated observer, the fact that NXP now feels in shape to do big acquisitions is a pretty good signal. These guys are on the rise, and that may not be bad for Freescale at all.
But I think, this was regular Hedge Fund strategy of buying companies. Take a ton of money from the financial market. Buy off a company or subsidiary and pay with the borrowed money. Then put all that on dept to the bought company.
That was the way it also worked when the Hedge Fonds bought it out of Philips.
That was the way it also worked when the Hedge Fonds bought it out of Philips.
As a Dutch guy I'm happy it's the other way around for once.
NXP has more employees, higher revenue and net income.
this seems like a straight merger.
Just checked the market capital and it's actually NXPI=2*FSL, NXP and FSL are both spin-offs, both got a lot of hedge-fund debt, but it seems NXP did better than FSL in the last few years.
"Smaller player"
I'm not sure who're your calling a smaller player, if NXP or Freescale, but it only shows your lack of knowledge about both
I'm not sure who're your calling a smaller player, if NXP or Freescale, but it only shows your lack of knowledge about both
Tax evasion or?
Freeslide hits bottom, film @ 11.
The debt obligations are the typical result of private equity intervention. It's basically financial engineering which benefits mostly the private equity people.
For a good read about conglomerates and company architecting, I would suggest Warren Buffet's most recent shareholder letter from a few days ago, especially the part where he discusses the skepticism that should be shown towards bankers and financial people proposing company spinoffs to "unlock value".